Tag: Commercial Insurance

Do I really need Inland Marine Insurance?

Inland marine insurance is a specialized form or property insurance. It is often referred to as equipment coverage or Floaters by many business owners and insurance agents. The primary distinction between inland marine and other property insurance is the fact that inland marine is specifically for property that is likely to be moved or in transit, or it is a highly specialized type of property that required a unique valuation.

inland marine insurance

Originally, inland marine insurance policies were referred to as Floaters because they were primarily policies written to cover cargo in transit on large marine vessels. Inland marine coverage has expanded in the U.S. to include most types of property that has an element of transportation. Today, inland marine insurance covers a wide range of property and equipment.  When the property being insured does not fit within a traditional property insurance policy and is not always stationary in a reasonably fixed location it will automatically be eligible for an inland marine quote. While inland marine insurance is slightly more expensive than other property coverage, it also provides additional protection from theft or damage to the property while it is away from the primary business location.

The most common types of inland marine coverage includes construction equipment, transportation cargo, mobile medical equipment, cameras and movie equipment, musical instruments, fine arts and solar panels. Traditional property insurance is not designed to cover claims associated with these types of property. It is not uncommon for a business to purchase both property coverage and inland marine coverage together as part of a Business Owners Package (BOP).

Even though most homeowners policies provide some coverage for personal property such as fine arts, jewelry, guns, antiques, and musical instruments, these policies typically have lower insurance limits and provide less coverage in terms of causes of loss. In some instances, individuals or home based businesses find some of their property can’t be covered properly by their homeowners insurance. This is another situation where an inland marine policy could provide additional coverage.

Personal inland marine coverage is also offered in rare circumstances. It is very similar to a commercial inland marine policy, but the main difference is the named insured (i.e. the person or business buying the policy). Personal inland marine polices are commonly written for individuals who want broader insurance coverage for select property, or want higher limits of coverage than a homeowners policy will provide.

Commercial inland marine insurance represents approximately 2% of all insurance premium written in the United States. This is not a large amount, but when your business needs it it is a great thing to have. Claims on this type of coverage are much more common than many business owners assume. Most business owners and insurance managers could benefit from having a long discussion about what business equipment commonly leaves the primary insured location. In most cases it is only insured if it is located at primary insured location. Once it leaves the premises it must be insured under an inland marine policy. In many cases business owners have turned in property claims on equipment they store or use offsite, only to find their business property coverage does not cover the claim.  This is frequently when business owners understand the value of their inland marine coverage. Unfortunately many times it is too late.

What is General Liability Insurance?

General Liability (GL) Insurance is the most important insurance coverage a business can obtain. It is frequently referred to as the first line of defense. GL Insurance protects policy holders from third party risks associated with lawsuits and other claims. It can cover things as simple someone slipping and falling when they come in to your building, to a fire in the basement of your property.  General Liability is required by law in most states. Businesses are often required to purchase coverage with most contracts for leases, loans, and work performed for others. More importantly, businesses need general liability in order to protect their business and personal assets.

Get the best answers to your questions about general liability insurance coverage at myinsurancequestion.com

In most cases a General Liability Insurance Policy is the first line of insurance purchased by a business. It is usually purchased in addition to other policies like Workers’ Compensation, Commercial Auto or Professional Liability Insurance. Most agents can easily package all of these policies in to one Business Owner’s Package (BOP). Purchasing insurance from one carrier in a BOP, is a good way to maximize savings. Dealing with one carriers also makes interactions much easier for business owner’s when they have to get certificates or when there is a need for a claim.

One part of a General Liability Policy that is confusing for many policy holders is, who is a Third Party? Third parties can include anyone from customer’s, to contractor’s, to anyone who may be injured as a result of an action taken by you, your employees or caused by the actions of your business in some manner. It does not protect your employees. That type of injury would be covered under a Workers’ Compensation Policy. In most states Workers’ Compensation is required by law.

Typically a General Liability Insurance Policy provides only specific types of coverage named within that policy. GL coverage is almost always related to third parties who suffer a loss caused by the insured as opposed to employees and the insured’s themselves. Generally speaking, covered losses must be unintentional. Intentional damage  is not covered by most liability insurance policies.

Some examples of incidents covered under a General Liability Insurance Policy are:

  • Personal Injury
  • Advertising Injury (The unintentional use of a competitors advertising material)
  • Medical expenses
  • Legal defense costs
  • Property Damage (third party property caused by company negligence)
  • Electronic Data Liability (Businesses that service computers and could cause damage to a server)

One common misconception about General Liability Coverage is that it is all encompassing.  There are many instances where an occurrence is not covered by a General Liability Policy and there are other types of insurance offered to fill those gaps. That is where the necessity for a BOP can be crucial. When all coverages are purchased from one carrier there is less risk of there being a gap in coverage. It also speeds up the time for a claim because there are not two insurance companies interacting to determine who is liable for the claim. Most Insurance agents can help a business owner determine any and all coverage your business needs. All businesses should start with a General Liability Policy.

Workers’ Compensation, Competitive State Funds

Each state has their own method for how they go about setting up a provider of last resort for workers’ compensation insurance coverage. This provider of last resort is also referred to as the assigned risk provider, the state fund or sometimes as the pool. This provider is designated as the provider of last resort for businesses who cannot find coverage through the open market. It is typically more expensive from this provider for a number of reasons.

Although, I have recently found there are a few state funds that are very competitive.  Some are so competitive my select carriers cannot compete with the rates being offered. I have a hand full of accounts that in the last few months I have tried to move out of the various state funds, but cannot find competitive rates.

Two of the states that I have had a hard time competing in are Texas and Kentucky. Both of these “competitive state funds” are really good at what they do. Offering Workers Compensation with both great rates and great safety resources for their insured’s. The clients I have tried to move out of these state funds are companies that do not fit in the underwriting box of our main street carriers. They still have opportunity to get coverage from a carrier that will offer pay as you go work comp and get out of the state fund. However the day has come when my current clients have said I am perfectly fine staying with the state fund. These carriers are offering dividends in some situations and are also offering an in network option. The in network option offers a network of Doctors that work with the carrier and streamline the process for workers’ compensation claims. This saves money for the employers and lowers the total pay out for a claim.

The state of Colorado also offers a “competitive state fund”. Three years ago I would have said my markets could still compete with these states in the voluntary market. Today I am not so sure. Don’t get me wrong it is still worth going through the process of getting quotes from all options. Depending on what classes of business the funds are doing really well in, you may be able to find better rates in the state fund. Much like the select carriers that are out there, the state fund will write most classes of business, but that does not mean they are going to offer their best pricing. For instance, take a Class Code 9014. This is for a commercial/industrial janitorial business in the state of Texas and this business has a substantial amount of payroll. The industrial cleaning portion of this company is going to kick them out of most of my select carrier underwriting guidelines. That leaves me with my high-risk carriers and my state fund (Texas Mutual). The high-risk carriers are usually going to have higher rates because they are offering to cover a business that not many carriers are willing to take the chance on. The high-risk carriers can only offer a 25% max credit. If the rates are not low enough to begin with we still are not going to be able to save the client money. On top of that we have the in network option and the dividend program. Many customers are benefiting by staying with the state fund of their home state.

The flip side to this is if we take the same Texas Janitorial Company and they decide to expand their operations outside the state of Texas. This would create a completely different scenario. State funds do have the ability to offer “other states” coverage’s on a separate writing paper or policy, but that is usually very limited to states and how much payroll will be allowed. In this case a high-risk carrier would be beneficial. The high-risk carrier will often times have the ability to add additional states to the policy as the company grows. They may also be able to offer better rates than the alternative, which would be having a policy with a handful of separate state fund policies.

Whether I am trying to move an existing client to a more competitive carrier or I have the opportunity to help a client that has come to me in need of a new policy. I have the tools and the ability to take care of the companies insurance needs. That can be through the state fund or through one of our many carriers.

What is the process for a Workers’ Compensation Payroll Audit?

The premium for most Workers Compensation Insurance Policies are based on a payroll “estimate” for the upcoming 12 month period from the effective date of the policy.  This is made as accurate as possible during the workers compensation payroll audit.  In addition, each business type is assigned one or more workers’ compensation classification codes. Each of the workers comp class codes are assigned a percentage rate factor. Payroll is than multiplied by the percentage rate factor for each class code. This is what determines the amount of the premium. After the policy period is complete, EVERY standard workers compensation carrier will perform a payroll audit for the previous 12 months of coverage.

During this payroll audit process the auditor can require either a physical or mail audit. Mail audits are fairly simple. They require completing a worksheet and submitting the requested payroll verification documents. Physical audits require the auditor to meet with the business owner, collect and verify payroll documentation and inspect the business to determine proper classification. Payroll documents usually include year-end tax reports, payroll ledgers and 1099 payroll information.

The purpose of an audit is to determine the “actual” wages paid to employees and to make sure the employees are classified correctly. After the payroll audit process is complete, the auditor reserves the right to change the workers compensation class code however they interpret the business based on their inspection. The auditor will report to the insurance carrier, the “actual” wages paid to employees and uninsured 1099’s per class code. The insurance carrier will than adjust the payroll figures and class codes. IF need be the auditor will than send the business owner a refund or an invoice for the additional amount due. If the business owner fails to complete the audit as requested it will cause difficulty purchasing a workers compensation policy in the future.

After the business owner receives the audit results, the business owner has the right to dispute the results if they feel something is incorrect. Business owners can go directly to the audit department to capture the auditor’s report/notes or business owners can involve their agent to assist with this process. If a classification code is changed and the business owner doesn’t agree the business owner must request an inspection by the appropriate state workers compensation bureau. Typically this request costs the business owner a few hundred dollars. The bureau inspection and classification code determination is final.

Should I Buy Workers’ Compensation Insurance?

 

This is a question that has been debated often in the Workers’ Compensation Insurance Industry. I think the best way to view this question is to break it down to an understandable level. Most Business owners’ biggest asset and achievement is their company. All of the blood, sweat, stress, and long hours that they have dedicated to this endeavor can be gone in a flash without insurance. A lot of the time it’s the cost of insurance that concerns owners. I never use it or I don’t need it is how business owner’s justify not carrying Workers’ Compensation Insurance Coverage. Why is it that we will insure our cars, home, and life but not our biggest asset? You may have the safest workplace in the world, but something could happen. That something could be just a fluke situation, but wouldn’t you rather have the protection of Insurance vs. the risk of covering out of pocket if something does happen. Below is an example for you to think about related to Workers’ Compensation Insurance:

 

Imagine you own a Law Firm. In your mind  your exposure to workers’ compensation insurance claims is minimal at best. Driving is an exposure that you may not think of that does exist for you and your business. Even though it does not happen very often it does exist. This could be driving to a different law office to pick up papers or meet for a mediation. You could be meeting with a client at their home of out of town. You could just be going down to the courthouse to file paperwork or go to trial. What happens if you or your legal assistance gets in an accident and is hurt. You tend to think that since it was an auto accident it should fall under auto insurance. What you don’t realize is that this employee was doing something in the scope of work and this is viewed as a workers comp incident. What if that employee can’t work anymore and they hire a lawyer. You don’t have work comp coverage so you could be directly responsible for paying claims out of pocket. If you have workers compensation in place, which for a law office is very affordable, then you could file this claim and be covered. You worked many years building your practice so why not protect it instead of leaving all your hard work and client development exposed to changing dramatically or ending completely over an incident that you could have taken care of with insurance.

 

Another quick example is a company that has about 5 employees and only Office exposure. This business doesn’t offer health insurance or work comp. The business owner thinks the business only has office staff. What’s the worse thing that can happen? Well in this scenario, Employee A is getting a glass of water from the dispenser and some water spills onto the floor unnoticed by the employee. Employee B later gets up to go send a fax. On their way Employee B slips and falls straight back and breaks their arm. If there is no insurance in place, the business owner is going to have to pay for this out of pocket. This will take money from the profitability of the company. The Cost of medical care for Employee B was around $20,000. Now if the same Business Owner had Workers’ Compensation Insurance Coverage, that probably based on exposure would have cost around $1,000 for the year, they could have saved $19,000. That is real money that makes a huge difference to business owners of any size.

 

There are many other examples we could go over from contractors to home health care to restaurants. You as a business owner may not think of the risk, but someone in your same business has either felt the pain of not having coverage or the relief of knowing that insurance is protecting what they have spent years building. Don’t leave your most treasured asset exposed. Consider the long-term benefits of insurance. It’s not a matter of if it will happen. It’s a matter of when it will happen.

What is Cyber Insurance? Does my business really need it?

Cyber Insurance is a new and emerging part of the insurance sector. Most of the coverages are so infant that common terms have not yet been established by the insurance industry. Most of the risks associated with cyber technology are so new that many business owners still think they do not effect their business. Those business owner’s are wrong.  In today’s day and age, it is becoming more and more difficult to operate a successful business without a presence online or without storing some type of information about your customers. In these situations a business must have cyber insurance or run the risk of being liable for all costs as a result of a data breach.

Learn how to prevent your small business from being a victim of a cyber attack at myinsurancequestion.com

A normal General Liability Insurance Policy does not cover damages caused by most data breaches. This is a fact many business owner’s do not realize. Many business owner’s think General Liability Insurance is an all encompassing coverage. It is not all encompassing. Most General Liability Policies covers losses due to bodily injury and property damage. Third party information lost in a data breach does not fall under losses covered by a General Liability Policy. A separate Cyber Insurance Policy is necessary in addition to a General Liability Policy.

Frequently business owner’s think they just don’t have enough customers for cyber insurance to be relevant. They might think not enough people in their business even use a computer for business purposes or they do not have enough customers for someone to want to hack them, but the main way data is stolen is not from sophisticated hacking techniques. Data is often stolen by someone stealing a laptop. A stolen laptop could happen to any business, not just those who work with advanced computer technology.

When a data breach does occur, the average cost to a business is around $200 dollars per customer. If your business loses the information of 100 customers, it could cost your company $20,000. If that amount were 10,000 customers it would cost about $2 million. Could your business survive a loss of these amounts? If not than you need some form of cyber insurance.

There are three main types of coverage a company may need:  Cyber Liability, Cyber Security and Technology Errors and Omissions. The first two deal with coverage resulting from a data breach. The third deals with companies that provide technology services and products.

Keep your business secure from a data breach by reading the most up to date information about cyber insurance at my insurance question.com

Cyber Security

Cyber Security is the term most commonly used to refer to first party coverage. First party coverage deals with damages to you and your company. These damages are often referred to as the immediate response costs resulting from a data breach. These costs include notifying all customers who are affected, hiring a forensic team to find out how the breach occurred and providing credit monitoring services for up to one year. These three costs are required by law in most states. Cyber Security Coverage would also cover costs like hiring a public relations firm to help repair your businesses tarnished image and setting up a post breach call-center to service customer concerns.

 Cyber Liability

Cyber Liability is the term most commonly used to refer to third party liability dealing with a data breach. Some industry professionals may refer to it as Information Security and Privacy Insurance. Third party coverage deals with damages to anyone who is not you or your employee, who was harmed by the data breach. It includes customers whose data was stolen or vendors you do business with. This will pay up to the policy limits for court costs, defense costs, some fines related to the breach and lost monies that were stolen from those effected.

Technology Errors and Omissions

The final type of coverage is Technology Errors and Omissions Insurance. This type of policy is a form of liability insurance that helps protect businesses providing all types of technology services and products. This coverage prevents businesses from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in a civil lawsuit. Costly mistakes can and will happen, even to employees with the best training and years of experience. Technology Errors and Omissions Insurance is designed for when these errors take place. A good example where this coverage is necessary would be if a web developer provided faulty coding that causes a business to be closed for several days because their website is down.

Not all businesses need all three of these coverages. The most common coverages businesses need are Cyber Liability and Cyber Security. Not all businesses will need Technology Errors and Omissions Insurance, but those that do typically are at a very high risk if not insured. Most insurance providers prefer to offer these coverage’s as a part of a Business Owner’s Policy (BOP). A BOP usually includes general liability, business property, business loss of income, EPLI and cyber insurance. Offering packages like this contain the cost to the business and helps ensure there are no gaps in coverage. In today’s business climate some form of cyber insurance is essential to all businesses. Is your business at risk?

 

 

What are the main benefits of a Business Owner’s Policy (BOP)?

A Business Owner’s Policy is a tailored insurance package for businesses in a particular industry. The package can be adjusted to fit the needs of each individual business, but they come in common packages specific to each industry. Insurance companies have found certain coverage’s common to each industry and attempt to get business owner’s as fully covered as possible. Most include General Liability, Professional Liability and Business Property Insurance. With a business owner’s policy insurance companies can make sure there are no gaps in coverage and make sure the business is not carrying too much or unnecessary coverage. Carrying a BOP benefits a business owner in three main ways.

Pricing is the main benefit that first attracts business owner’s to carrying a Business Owner’s Policy. Insurance companies are more likely to give businesses a break on price if they are selling that business multiple policies. Business Owner’s may be able to call around and get a better price on each individual policy, but that is time spent not working. With the help of a good insurance agent a business owner can allow the agent to shop the policy around to many insurance carriers. This allows the agent to negotiate the best price and the most complete coverage. For this reason it is important to choose an insurance agent who has relationships with many insurance providers, not just a select few. Many agencies work exclusively with just a few carriers and this does not allow the agent to shop around your policy if you are in a tough classification code or have a negative claims history.

Ensuring there are No Gaps in Coverage is the next benefit of a BOP. Shopping around for each individual policy takes lots of valuable time for business owner’s. In most cases it does not save the business as much as getting a quantity discount by combining coverage’s. A more important benefit of a BOP is making certain there are no gap’s in coverage. When businesses shop their policies around a la carte it can cause there to be grey area’s between exclusion’s that are not covered.  If all policies are bought from one carrier the insurance provider can guarantee you are fully insured.

For instance, businesses that get a general liability policy from one insurance carrier and a professional liability policy from another carrier may have an exclusion in both policies that make the occurrence not covered. This is where insurance has many grey areas. When an incident occurs the business will more than likely have to wait longer while the insurance companies determine who is liable for the incident or if anyone is liable for the occurrence at all. If you have a BOP with just one carrier typically there is General Liability, Professional Liability and an Umbrella Policy. In this case the insurance company just determines which policy is in effect and processes your claim.

Certificates are the final way businesses benefit from BOP’s. Certificates are needed when businesses are involved in projects they are contracted on. A certificate is legally required before work can start on that project. If you work on many projects with different general contractor’s than you will need this certificate for every general contractor you work with. If you have a BOP that is one phone call only.  For example, many artisan contractors do work for several general contractors. Take an electrician as an example. For each general contractor an electrician does a project for they need a certificate proving insurance coverage. If each coverage is with a different carrier that is an additional call the electrician has to make. If that electrician has a BOP they call one agent and can get a certificate for all of their policies.

Again, these are three of the many benefits of having a Business Owner’s Policy. The next time your business is up for renewal it is probably best for you to bring up a BOP with your agent. Insurance carriers are typically more aggressive with discounts when they are getting more of your business.

 

Floridas Workers Comp Exemption Process in 20 Steps

The process for an owner of a company to get themselves properly excluded from a workers compensation insurance policy in Florida is quite cumbersome. In fact, owners not becoming properly excluded is one of the leading causes of workers’ compensation audit balances in the state of Florida. In Florida, an officer or LLC Member can only be excluded if they have a properly filed a Florida workers comp exemption form on file with the state. This can be done in two ways: 1) Complete a form by hand, get a notary signature, and mail the form to the proper Division of Workers Compensation office; or 2) Complete the online version of the form.

Florida workers comp exemption

The handwritten option is not overly reliable. Any errors on the form or if it is sent to the wrong office can cause the form to not be filed. In this circumstance the owner ends up getting included on the policy and will owe additional premium.  The online form is the best solution, even though the process is cumbersome and detailed. That’s why I’ve created this 20-step process for an insured to follow to make sure the officers are properly excluded.

Florida Workers Comp Exemption

1. Go to Sunbiz.org

2. Use the Document Searches Tab to find your Corporation or LLC. It is best to use the Tax ID

3. Make sure the business is in Active status. If not, correct this with the secretary of state before filing your exemption.

4. Your information inputted for your exemption must match Sunbiz. Therefore it is important to have this information handy.

5. For online filing use the link below. Otherwise use the paper form (input form number)

https//apps.fldfs.com/bocexempt/

6. Click the Apply for or Renew an Exemption button

7. Agree to Terms and Use a Pin to access in the future.

8. Section 1:

a. Applicant Name – Name of the person who is being excluded

b. Drivers License Number – select the correct state

c. Last 4 of Social

d. E-mail address – this is not required but helpful

9. Section 2:

a. Select Construction or Non-Construction

b. Select Either an Officer or Member of LLC

10. Section 3: Important to have your Sunbiz paperwork for this

a. Enter all information as listed on Sunbiz. Do Not Mis-Spell

b. Select a Scope of Business from the drop down menu. This is your main workers compensation class code with a 0 in front of the 4 digit code.

11. Section 4:

a. Input the document number listed on Sunbiz

12. Section 5

a. Either complete or check mark the “not applicable” box.

13. Section 7

a. Input other company info the applicant is an officer for

– This does NOT mean that the exemption is registered for each entity. You MUST enter the exemption information for EACH entity the owner is connected with. A separate application is required for each Tax Id.

14. Section 8

a. Verify this is correct

15. Section 9 –

a. Input workers compensation carrier name

16. Section 10

a. Input Name & Drivers License

17. Hit Continue

18. Hit Submit – there is a submit button after you hit continue

19. Processing Time – It generally takes 3-5 business days to process. Check back on the Florida Proof of Coverage website until it shows as registered.

20. If the Application is Rejected – Use the register website above, Click “Modify Application”, input your Pin and correct the problem. Best to contact the Florida Division of Workers Compensation and ask why the application was rejected so you know what to correct. 850-413-1609 option 2

Notes

Most exemptions are only active for 2 years. The exemption must be renewed by re-entering the information online.

Construction exemptions require a payment of $50

It’s very important to check back on the status of the exemption. Several times when registering for exemptions my clients have not received communication and the application didn’t process.

Spelling everything exactly like listed on Sunbiz is VERY IMPORTANT

Are you paying too much for Workers Comp or too much for Payroll? Maybe Both

 

Have you ever purchased a used car or found a great deal on a piece of used furniture at a “sale”?  Than got home to find out it was not the steal you thought when writing the check. Buying commercial insurance can sometimes be this way. It can be a stressful and time-consuming process, especially if you do not have an experienced insurance agent on your side. A good insurance agent can help you find things you might be overpaying for, or maybe some parts of your insurance policy are not set up right at all.

 

For example, I recently worked with a client who’s business is in a high risk agriculture industry. They pay a significant amount on their workers’ compensation insurance each year. This business was part of an alternate service organization, which provided payroll services. It than reports the payroll to their workers’ compensation carrier for the companies Pay-as-You-Go reporting. This was two separate companies doing these processes.

 

In the case of this business we found the workers’ compensation rates were a little high. So to help this business we found a carrier who could save them money on their workers comp coverage. We also found their payroll reporting charges were very high. In this business there are lots of companies that provide work comp and Payroll services. both services. Most of these agencies can offer a better rate because they are getting both businesses. Some try to charge lower workers comp rates, but make up the difference by charging more for the payroll processing side of things or vice versa.  Sometimes it is just that a payroll company knows they can build in a little extra that ends up costing you a lot!

 

For this business we were able to find an aggressive workers’ compensation carrier that provided competitive workers comp rates.  This carrier also integrated their payroll services and collected on a Pay-As-You-GO billing plan. By combining the two services, we were able to save this client nearly $25,000 per year on their work comp premiums and $23,000 per year on their payroll processing. Part of this savings was based on the payroll being reported by a company different than the insurance carrier. This disconnect can cause inaccurate reporting. Many companies work with agencies who actually operate the payroll service in house. They do this with the insurance carrier operations to make this fully integrated. This process also helps prevent fraud by acting as an extra verification procedure.

 

There are a lot of solutions out there for getting coverage in place.  If you can get workers compensation in place on a hard to write class code and get it on a pay-as-you-go basis, it seems like a dream come true.  However, this is an example of how just looking at the down payment or the workers comp rates alone can end up costing your company significantly. It’s always best to review the rates you are paying for this type of plan.  Review what is being charged for all the services provided. Sometimes this is where another company is really making their margin at your expense.

Business Income Coverage

Business Income Coverage

If you are thinking about adding business income coverage or would like to learn more about why you have it, let me start by defining what Business Income Coverage. According to The Insurance Risk Management Institute, business income coverage is commercial property insurance covering loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. It may also be extended to apply to loss suffered after completion of repairs for a specified number of days. Business income coverage is also referred to as business interruption coverage.

Now that we have defined business income coverage, lets look at how it works.  This coverage is designed to cover what your business lost. Not the businesses total revenue. What is typically covered under this policy is profits, fixed costs, temporary locations, extra expenses, civil authority and few other areas like training cost. Most policies will have a standard 72 hr waiting period before coverage begins. You may be able to modify this if you talk to your agent. They can a;ways check with carriers for additional options to expedite this process. The period of restoration ends when property should be repaired or replaced within a reasonable time-frame. This is in comparison to a similar quality and type of business as yours to either repair the facility or move to a new location.

Business income amounts are determined by comparing historical net income with actual net income during the period of business interruption. The loss is the difference between the net income that would have been earned under normal business conditions and the net profit or loss that has occurred during the period of restoration. Lets say after repairs have been completed that the business is still not generating the business it would have prior to the loss. You can add extended business income coverage to you policy for up to 60 days. For example if your business resumes and income is still below normal amounts then extended business income would pay the difference for that time period.

Also, business income coverage will cover what is called extra expenses. This part of the coverage is for the cost to rent a temporary office space, lease computers or office machines, and installation of new equipment during the period of restoration. Just like business income, this is limited to the 12 months from the date of loss. The time limits on business income may seem like they are not long enough, but according to industry studies most businesses who don’t have this coverage do not reopen their doors.

Business income and extra expense is designed to help you through an uncontrollable event. Within the coverage of most policies it can prevent you from losing key staff members that otherwise would leave to find other employment due to the loss of a paycheck. This is a basic snapshot of the coverage for you to get a grasp of what it can do for your business. In most cases this coverage is already a part of your BOP policy. Many business owner’s look at it and think this could never effect their business, but in reality it can save your company. It will benefit certain types of businesses more than others, but it can help everyone. Retail Stores, Medical Offices, Restaurants, or anyone that operates out of an office location where customers come to you need this coverage. Contractors can also benefit from this coverage, but it is not as critical as locations where customers come to them to generate business.